China's service sector stabilizes growth

BEIJING -- China's non-manufacturing sector activity showed a slight improvement in November, as new export orders and employment added stabilizers to the economy.

The purchasing managers' index (PMI) for the non-manufacturing sector came in at 53.9 in November, not much different from October's 53.8, according to the National Bureau of Statistics and China Federation of Logistics and Purchasing (CFLP) monthly report.

The figure has stayed well above the waterline of 50 that demarcates expansion from contraction.

PMI for the construction industry rose to 58.9 in November from 58.5 in. Meanwhile, the sub index for non-manufacturing employment stood at 49.5, ending two month's of decline. New orders stood at 50.1.

The official non-manufacturing index samples 1,200 non-manufacturing enterprises of various sizes in sectors including services, construction, software, aviation, railway transport and real estate. among others.

HSBC's PMI for November, also released on Wednesday, showed service business growing at solid pace. little changed from October, at 53.0.

"Non-manufacturing activity, important in stabilizing growth and employment, was stable in November," said Cai Jin, CFLP vice president.

Wu Wei, an analyst with China Logistics Information Center, said, "Employment recovery indicates that the economy is running on more stable ground."

The moderate service's expansion was contrasted by a waning of the manufacturing sector. Official manufacturing PMI slipped for the fourth month in a row, to 50.3, the worst in eight months.

The slide merely reflects the slowdown of the whole economy, which is growing more slowly now than for a number of years.

Qu Hongbin, chief economist of Asian economic research at HSBC, said that alongside the problematic manufacturing sector, the service sector saw very little improvement in November.

"We expect recent rate cuts will stabilize demand in the near term," he said. "However, downside pressures persist and warrant further monetary and fiscal easing."

To stabilize growth, the Chinese government has sped up approval for railway and airport projects, with their value expected to top one trillion yuan this year.

The cabinet wants private capital to invest in seven sectors, including energy, transport, and municipal infrastructure and has announced innovative financing modes through public-private partnerships.

In a bid to bolster especially the small and medium-sized firms and reduce their financing costs, the central bank announced its first interest rate cut in more than two years in November.

Zhu Haibin, J.P. Morgan China chief economist, believes that despite rebalancing efforts, fundamental growth drivers may not change much in the near term, while a continued slowdown in the real estate market will be a drag on growth.